COVID-19 Impacts the Wind Power Market

COVID-19 is still spreading across entire countries and regions with mixed success of mitigation and containment. This pandemic has taken a massive toll on human life and the economic engines of nearly all markets. The wind power market has been hit with business cycle delays and supply chain impacts. Though the fundamentals of the wind power market remain strong, a minor reduction in total capacity installed in 2020 and 2021 is inevitable.

The majority of wind turbine and component factories have continued to operate throughout this crisis, though some factories have been affected. Nevertheless, continuous disruptions in global supply chains due to restrictions on movement of goods and people have slowed activity and increased CAPEX.

The Pandemic Takes a Toll on Production

Wind blade production took the largest hit in the early days of the coronavirus outbreak because it is the most labor-intensive part of the wind energy supply chain. A wind blade typically takes at least 2 days to assemble with approximately 100 workers working in proximity. GE Renewable Energy’s blade subsidiary LM Wind Power had to close two of its blade factories in Spain for 2 weeks in March when nonessential businesses were closed. Vestas and Siemens Gamesa also had to close blade facilities in Spain in March. Since then, new health and safety protocols have been enacted, and the factories reopened in early April after the government eased some business restrictions. In late April, LM Wind Power tested workers at its North Dakota blade facility, and over 140 employees tested positive for the virus. All 900 workers were ordered to quarantine for 2 weeks on paid leave.

Manufacturers Experience Financial Setbacks

In the meantime, independent wind blade manufacturer TPI Composites and major publicly traded wind turbine manufacturers suspended earlier financial guidance for 2020. The latter group includes Vestas, Siemens Gamesa, and Nordex SE. Siemens Gamesa said the COVID-19 outbreak made it impossible to “forecast or quantify with reasonable accuracy the full duration and financial magnitude of the impact” on its commercial activity. However, when reporting its fiscal second quarter earnings on May 6, it said the pandemic “had a direct negative impact of €56 million ($71.4 million) on profitability and intensified challenges experienced by the onshore business in India and Northern Europe.” 

Vestas posted its first quarterly loss since 2013 due to supply chain and logistics challenges. It announced in April that it would lay off 400 employees, mostly in Denmark, who were working on various technology projects that are not essential to the primary mission of 2020 turbine deliveries. Executive management took a 10% pay cut until end of 2020.

The offshore wind sector is less affected than the onshore sector, but it has still seen impacts. For example, offshore construction company DEME is pre-quarantining staff who will board offshore vessels to ensure their health and safety and avoid the risk of contamination. It has hired a hotel ship moored in Ostend, Belgium, where staff will stay for 2 weeks before boarding one of the vessels. DEME transports and installs foundations, turbines, inter-array cables, export cables, and substations for offshore wind farms.

Unfortunately, these examples will not be the last headwinds on the wind power market. Guidehouse Insights' Global Wind Database service has made downward revisions to its forecasts, reducing some capacity between 5% and 10% in 2020 and 2021 due to inevitable business cycle delays. The countries on the higher end of the range of capacity reductions are the US, China, and Spain. Guidehouse Insights will continue to monitor the COVID-19-related impacts on the wind market and make adjustments as needed.